LC PB8-1 Preparing Operating Budgets Beach Wind Company manufactures kites that

Question

LC PB8-1 Preparing Operating Budgets Beach Wind Company manufactures kites that sell for $20 each. Each kite requires 2 yards of light- weight canvas, which costs $0.60 per yard. Each kite takes approximately 30 minutes to build, and the labor rate averages $8 per hour. Beach Wind has the following inventory policies: Ending finished goods inventory should be 30 percent of next month's sales. Ending raw materials inventory should be 20 percent of next month's production. Expected kite sales for the upcoming months are: March Aprill May June July August 850 700 650 720 830 760 Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced. Annual fixed manufacturing overhead is estimated to be $9,000 ($750 per month) for expected production of 9,000 units for the year. Selling and administrative expenses are estimated at $820 per month plus $0.75 per unit sold.

Explanation / Answer

Solution:-

(1)

(2)

Consumption of RM for july month = (830+228-249)*2 = 1618

(3)

April May June Qtr1 Cash sale 420 390 432 1242 Credit sale collect in same mont (20%) 140 130 144 414 Credit sale collect in following month 170 140 130 440 730 660 706 2096 Total Receipt (730*20) = 14600 13200 14120 41920

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